Crisis, learning and policy change in the European Union

ABSTRACT

What is the causal relationship between crisis, learning and change? How did causality unfold in the key years of 2009–2010 when the European Union had to face the most formidable attacks to the single currency and responded with substantial reforms of the euro area? We question the conventional identification of the cause-and-effect relationship provided by theories of crisis management, integration and policy learning. Drawing on models of contingent learning developed within psychology and behavioural economics, we theorize that surprise produces behavioural change via a fast-paced associative mechanism and that policy learning follows change. We then run our exercise in causal identification through a plausibility probe. We show that our argument passes the plausibility probe. Our conclusions on cognition and situational effects on learning during crises suggest a new research agenda, more sensitive to how individuals behave in the real world and more robust in its micro-foundations.

KEY WORDS:

• Contingent learning
• crisis
• euro area
• mechanisms
• policy change
• policy learning

View correction statement:

Correction to ‘Crisis, learning and policy change in the European Union’

Acknowledgements

We are grateful to the audience at the 21st International Conference of Europeanists, Washington, 14–16 March 2014 for comments on a first draft. We also thank Skape at the University of Edinburgh (http://www.sps.ed.ac.uk/skape/research/meetings/2015_2016) for having organized a seminar on this article on 4 February 2016. Radaelli acknowledges the support of the Jean Monnet Chair in Political Economy. Finally, we thank Jeremy Richardson, Renaud Dehousse and the reviewers for their perceptive comments and suggestions. The usual disclaimer applies.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes on contributors

Jonathan C. Kamkhaji is a PhD candidate at the Department of Politics, University of Exeter.

Claudio M. Radaelli is professor of political science and director of the Centre for European Governance, University of Exeter.

Notes

1. During the first six months of the crisis (November 2009 to May 2010) Van Esch and Swinkels (2015: 1220) argue that, ‘rather than delving into the roots of the crisis, leaders predominantly discussed possible resolutions and the role they and others must play in them’.

2. Put simply, blocking in HCL experiments refers to difficulty in learning on cue–outcome relations when a specific cue is paired with an outcome in a single stage and then in a successive compound stage of the experiment the same cue is paired with another one producing the same outcome of the single stage (Morís et al. 2014)

3. To use an accessible example, consider Pavlov's experiment with dogs. In that, a cue consists in a conditioned stimulus (e.g., Pavlov ringing a bell). The outcome consists instead in an unconditioned stimulus (e.g., Pavlov feeding the dogs after having rang a bell). After several iterations of this cue/outcome dyad, dogs learn to associate the unconditioned stimulus (cue) to the conditioned stimulus (outcome), even when the latter is not presented. In fact, Pavlov dogs start salivating (reaction) when the bell is rung (cue); that is, before the food is actually provided (outcome). The learned reaction defaults when the known cue/outcome relationship is blocked or modified, eliciting hence a different reaction that is triggered by contingent learning rather than by conditioning. In the Greek case, the new dyad is a high budget deficit (cue) coupled with a risk of sovereign default – a totally new outcome in the light of the fact that in the first decade of EMU risk premia and interest rates were strongly unresponsive to member states' budgetary stance.

4. In the first decade of EMU, in fact, the many deviations from the Stability and Growth Pact (SGP) rules were never punished by the markets. In other words, risk premia were largely unresponsive to deviations from the SGP ceilings and risks of sovereign defaults within the eurozone never arose.

5. ‘Few of the standard criticisms of Europe's economic and monetary union expressed serious concern for this [default] prospect. Even the more extreme criticisms did not make it the focus of their attention’ (Jones 2010: 23).

6. ‘At the level of the EU it was difficult initially to deal with the immediate crises of the day, as individual member states were uncertain what steps had to be taken at that level, given the speed of the unfolding crisis the limited budget of the EU and the lack of response mechanisms catering to this kind of crisis' (Verdun 2015: 219). ‘In terms of European integration, these achievements are remarkable, not only for their scale and scope but also the speed with which they were adopted and put into place’ (Ioannou et al. 2015: 164).

7. Moreover, the other typology of supranational spillovers (the ‘cultivated ones’) postulates a visible entrepreneurship by EU institutions that was not observed empirically.

8. ‘Prior to the outbreak of the Euro-crisis, the Chancellor makes few references to European integration and hardly mentions European economic and monetary integration’ (Van Esch 2014: 293–4).